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Journal of Undergraduate Research

Keywords

FDI, foreign direct investment, China, geopolitical move, Europe

College

Family, Home, and Social Sciences

Department

Political Science

Abstract

The magnitude of Chinese outward foreign direct investment (FDI) flows has skyrocketed in the past decade. In the wake of the Chinese “Going Out” policy, many high profile Chinese firms are buying up companies in all regions of the world. It is curious that Chinese firms are poised to allocate large amounts of capital abroad so early on in their development. But what is more puzzling is the destination of outward FDI from China. Typically, a country’s FDI is determined by economic, cost-cutting motives. Chinese firms, however, tend to focus on areas that do not maximize their economic returns. This is especially the case in the European auto industry. To explain this business behavior, this paper looks at the interaction between high profile auto firms and the Chinese government and how that relationship determines FDI decisions in Europe. Through some aggregate data but then, more importantly, a qualitative look at the Chinese presence in the European auto industry, I conclude that Chinese FDI is less a traditional economic strategy than it is a geopolitical advance to regions that possess valuable long-term assets, including natural resources, key technologies, brands/prestige, and advanced management structures.

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